Question

You hear a politician say that she would like to lower the retirement age for receiving Social Security. What would be the impact of such a change over the course of one year?
Choose one:
A. a decrease in mandatory spending and, if no other changes are made, an increase in the government’s budget deficit
B. an increase in mandatory spending and, if no other changes are made, an increase in the government’s budget deficit
C. a decrease in discretionary spending and, if no other changes are made, an increase in the government’s budget deficit
D. an increase in discretionary spending and, if no other changes are made, an increase in the government’s budget deficit
E. no impact on the government’s budget

Answer 1

Answer:

The correct answer is B) an increase in mandatory spending, and if not other changes are made, an increase in the government's budget deficit.

Explanation:

Mandatory spending is the obligatory spending of the US government. It essentially consists of three social programs: Social Security, Medicaid and Medicare. It represents around 60% of total federal spending.

A decrease in the age for receiving Social Security would result in more mandatory speding because more people would be eligible for the program.

The federal goverment is currently running a deficit of almost 5% of US GDP. All else being equal, more people eligible for Social Security would increase the deficit even more.